An Empirical Study Of The Relationship Between State-owned Listed Companies Executive Compensation Incentives And Companies Performance

With the coming of era of knowledge-driven economy, competition is more and more fierceand talent competition has become the main theme of the competition in the market. As keydecision maker, senior executive plays a vital role in enterprise development since they are scarcewhile with high-tech knowledge and capacity. It has reached an agreement that entrepreneurshipis a fundamental factor of production in both theoretical and practical perspectives. Thus, how toeffectively inspire senior executive to achieve high performance has become a hot issue. In China,the state-owned listed companies have a huge impact on the development of the industry as wellas the whole national economy, which makes state-owned executives play a key role in thecompany’s long-term stability and development. Based on this, the author selects the executivecompensation of state-owned listed companies as the topic of the paper.This paper first gives us a literature review on scholars’ idea about the relationship betweenexecutive compensation incentives and company performance in both China and abroad.Secondly, based on principal-agent theory, human capital theory and incentive theory, takingstate-owned manufacturing company listed in Shanghai and Shenzhen from2009to2010asresearch sample, using descriptive analysis and regression model, the paper has analyzed therelationship between executive compensation incentive and corporate performance in differentscales, regions, external environment and debt level. The regression results show that theexecutive compensation is significantly positive with corporate performance in different groups(except for asset-liability ratio>0.5) and there is no significant relationship between executivesshare holding and company performance. Finally, based on the conclusions, the author putforward recommendations on executive compensation incentive system:(1) To build an executivecompensation structure both for short and long incentive;(2) To establish an effective supervisionand restraint mechanisms for executive compensation.